EDMC's enrollment falls by 16.3 percent

02/12/2013

In February 2011, Downtown-based for-profit educator Education Management Corp. counted 157,200 students enrolled in its extensive system of colleges and universities. Immediately following its 2011 second-quarter conference call, the stock was selling for $20.05 a share.

But Congress had begun investigating recruiting tactics used by EDMC admissions officers and those of other for-profit colleges. The next 18 months brought regulatory changes on recruiting practices and new rules for some loans available to students attending such institutions.

Now, following this fiscal year's second quarter, EDMC is reporting that enrollment in its colleges, which include the Art Institutes, is down to 131,500, a 16.3 percent decline overall. On Thursday, the stock closed at $3.98 a share.

The company is raising cash in part by selling buildings to third parties and renting them back.

During a conference call last week, Edward West, the company's president and CEO, said EDMC had completed the sale and rent back of four school facilities and one housing facility, and raised $65 million in cash. The company is also planning to take the same step for the building that houses the Art Institute of Pittsburgh on the Boulevard of the Allies, Downtown.

Last Friday, the company announced a debt repurchase on $375 million worth of bonds due to be repaid in 2014. Under the offer, bondholders would be repaid a portion of the principal, while the rest of the debt will be reissued at a 15 percent interest rate and come due in 2018. John Iannone, director of investor relations, said the company is prepared to retire $175 million of that debt, reducing its overall debt load.

When comparing the second quarter of this fiscal year to last year, the number of new students enrolled in the Art Institutes alone had fallen by 20.2 percent. That division has 49 physical locations, including Pittsburgh's, and an online operation. Average total enrollment for the three months ending Dec. 31, which was the end of the second quarter, was down by 10.5 percent.

Mr. West said the continuing difficulties of the overall economy, plus the reduced availability of the federal Parental Loan for Undergraduate Students program, has led to the lower student numbers at the Art Institutes.

He said dedicated teams of admissions counselors are now working at the high school level to develop financial aid plans for prospective students. The Art Institutes, which had a combined student body of 69,500, make up more than half of the company's 131,500 total.

"As a result of the various actions we have taken," Mr. West said in the conference call with analysts last week, "we believe the Art Institutes will see new student growth trends that are less negative during the second half of fiscal 2013 when compared to the first half of the fiscal year."